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Supply of utilities to insolvent businesses secured 9 February 2015

Business Minister Jo Swinson has announced the Government will ensure businesses undergoing rescue continue to be supplied with IT, telecoms and utilities services during restructuring.

Under proposals laid out in Parliament today following consultation, suppliers of services deemed to be “essential” will be prevented from cutting off supply or charging premium rates to businesses while insolvency practitioners seek viable solutions for rescue.

Suppliers will be guaranteed payment ahead of others owed money for services supplied during the rescue period, and will be able to ask for personal guarantees of payment from insolvency practitioners.

Suppliers will also be able to apply to court to terminate their contract on the grounds of ‘hardship’.

Furthermore, guidance will be issued to insolvency practitioners that they should make contact with ‘essential’ energy suppliers at the earliest possible time following appointment to discuss expected power usage.

The changes will be subject to Parliamentary scrutiny before coming into force in October 2015.

Business Minister Jo Swinson said:

“These changes will help struggling businesses during rescue while providing confidence for the suppliers that they will be paid for the essential services they provide.”

Giles Frampton, president of insolvency trade body R3, added:

“The changes are a good example of the adaptability of the UK insolvency regime. Some have called for the wholesale introduction of a US Chapter 11-style regime, but the truth is we can incorporate the best parts of Chapter 11, like these proposals, into existing legislation.”

“Over time, we would like to see more types of suppliers added to the list of those prevented from trying to steal a march on other creditors and take advantage of their importance to struggling businesses. It will also be important to review the impact of the requirement for Office Holders to give a personal guarantee to suppliers.”

The proposals were announced in response to a consultation on continuity of supply of essential services to insolvent businesses. The 31 responses to the consultation can be found here, while the Government’s proposals can be read in full here.

 

 

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